Investors Oversubscribed Nigeria’s Debut 30-Year Bond With Yield At 14.8 Pct
By Olumidagreaton April 24, 2019
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Nigeria sold its first 30-year tenor domestic bond on Wednesday at 14.80 percent marginal rate with investors bidding more than the amount offered at the auction by the debt office, results of the tender have shown.
The Debt Management Office (DMO) sold 53.16 billion naira of the 30-year paper at the auction, more than the 20 billion naira initially offered for sale at the auction against 80.41 billion subscriptions submitted by investors.
The debt office announced last week that it plans to raise 100 billion naira in domestic bond at an auction, with a proposal to raise 20 billion naira in the debut 30-year paper and 40 billion naira apiece in the 10-year and 5-year debt.
However, at the auction on Wednesday, the debt office sold just 37.43 billion naira in the 10-year paper and 6.81 billion naira in the 5-year debt.
While investors asked for 52.28 billion naira worth in the 10-year paper, they only asked to buy 16,61 billion naira in the 5-year debt.
The 5-year paper attracted yield of 14.50 percent while the 10-year paper which was also a new issue attracted 14.55 percent yield at the auction.
Dealers said, investors were asking for higher returns on the paper, but the debt office decline to raise its marginal rate.
Yields on the 5-year and 10-year paper at the March auction was 13.50 percent, which means the DMO raised the bar at this month’s auction.
At the close of the auction on Wednesday, the debt office was only able to raise 97.4 billion naira worth of bond, short of the 100 billion naira initially offered.
The government had targeted the life insurance premium and pension fund with the 30-year paper.
According to the head of the DMO, Patience Oniha, the issuance of the bond will meet the needs of annuity funds and other long term investors while also developing the domestic capital market and reducing the re-financing risk of the federal government.
“Another area of focus will be the management of risks associated with the debt stock to mitigate debt service costs,” Oniha said at a briefing on April 4, 2019.
She noted that the 30-year issue would enable government raise long-term capital for infrastructure, serve as benchmark for private sector raising of long-term investment capital.
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